Completion of Micro-Diamond Recovery at Motete

29 March 2012

Paragon Diamonds Limited

("Paragon" or the "Company")

(AIM: PRG)

Completion of Micro-Diamond Recovery & Operational Update at Motete, Lesotho

Highlights

·; Final micro-diamond results from Motete - 2,655 diamonds recovered in total

·; Road access construction for bulk sampling of larger macro-diamonds near completion, 1000 tonne sample to commence immediately

·; Drilling contract negotiated

·; Appointment of company ambassador

·; Diamond valuation services engaged

Paragon Diamonds Limited, the African-focused diamond explorer and developer, announces the conclusion to its micro-diamond sampling programme and operational update on the Motete Dyke. With the receipt of results of a final 268 kg sample taken at the western extremity of the dyke and at the highest point of 2,700m ASL, the Company has concluded its micro diamond sampling:

These results are consistent with all previous results, and include 17 macro-diamonds (>0.5mm/600μm) and a single diamond > 1.18 mm. The combined results, representing 2,655 diamonds including 131 macro-diamonds (>0.5mm/600μm) and six diamonds > 1.18 mm from 1,355 kg of samples are now being interpreted to establish a modelled grade for the Motete Dyke.

In the meantime, development of the road access to extract a bulk sample is proceeding apace. With the co-operation of the local communities and the district council, over six kilometres of access track to within one kilometre of the main dyke have been constructed by the Company. It is expected that mining equipment will arrive on the dyke and begin sample extraction before the end of March 2012.

The company has also negotiated a drilling contract to drill approximately 1,400 metres of NQ core at depth for a series of 12 intersections into the dyke up to 150+m below surface. This drilling, in addition to providing further sample material, is intended to demonstrate the continuity of the dyke at depth. The intersections will help to develop the wire-frame model and enable detailed volumetric estimates towards a scoping study and mine development plan. It is anticipated that the drill rig will be mobilized as soon as bulk sample extraction is complete, and that drilling will be concluded before the winter snows set in, in June/July of this year.

Ambassadorial Appointment - Meso Diamonds Ltd & Botle Diamonds (Pty) Ltd

The company is pleased to announce that Ntate Bataung Leleka has agreed to join the company in a consultative capacity, and to act as Corporate Ambassador to our Lesotho subsidiary companies (Meso & Botle). Mr Leleka is the former Principal Secretary (PS) to the Lesotho Ministry of Natural Resources (retired), and is intimately familiar with the workings of the Ministry and Mining Law within the Kingdom of Lesotho. He will contribute significantly to the company's developing relationships with the responsible authorities, and will mentor present and future relationships, applications and regulatory processes, that involve company activities in Lesotho. Paragon welcomes the association with, and assistance of, such a prominent and capable individual in Basotho mining circles.

Engagement of Professional Diamond Valuation Services

The company is pleased to announce the appointment of Mr. Alastair Garner and Radiant Diamond Consulting Ltd. as professional diamond valuers to the company, on a non-exclusive basis. Mr. Garner and his staff will undertake initial commercial valuations for the company on diamonds recovered from its various bulk sampling activities in Lesotho, and act in an advisory capacity on various valuation and regulatory processes, including official royalty valuations and Kimberley Process procedures. Mr. Garner has over 20 years experience in the trade, including 18 years with the Diamond Trading Corporation (DTC) and Diamdel, spent in London, Antwerp and South Africa. His particular field of expertise is the valuation of large ("special") and coloured ("fancy") stones.

Paragon Diamonds Chairman Francesco Scolaro commented: "Our management team continues to deliver positive results in a timely manner. I am encouraged with these results and remain confident that Lesotho will deliver a revenue stream for the Company."

In accordance with the AIM Rules, the information in this announcement has been reviewed by Stephen Grimmer PhD., MSc., a qualified geologist with over 20 years' diamond exploration experience. This news release has been prepared in accordance with the Canadian Institute of Mining - Guidelines for the Reporting of Diamond Exploration Results.

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Notes to editors

Paragon Diamonds is looking to rapidly develop producing and exploration diamond properties into a portfolio of high value assets located within Africa. To date it has secured a series of alluvial and hard rock assets which its exploration and development teams are working on to progress. The core focus at present are the companies hard rock licences located in Lesotho, a major producing diamond region. The Projects include:

Lemphane Kimberlite project Lesotho (83.75%)

Lemphane is one of five known diamond bearing kimberlite pipes within Lesotho, located 5km from the Liqhobong project. The Environmental assessment plan and access routes and exploration camp have been completed.DMS plant constructed and bulk sampling commenced with 35,000 tonnes of ore stockpiled awaiting processing. Extended bulk sampling of a further 25 - 40,000 tonnes is possible once initial sample completed.

Motete Dyke exploration, Lesotho (83.75%)

Motete is a substantial kimberlite dyke (fissure system) in close proximity to the Lemphane project. Known to be diamondiferous and currently undergoing initial exploration. Initial micro diamond analysis results in 2012 indicated that an in-situ grade of up to 1 carat per tonne is likely. The licence was awarded in December 2011.

Kaplamp diamond hosting Lamproite', Zambia

Kaplamp is a large prospecting licence known to host 14 Lamproite pipes within a known diamondiferous region and with five high profile targets identified for initial evaluation. The area is highly prospective as De Beers recovered significant amount of stones in 60's and 70's but relinquished area as Lamproites were not yet recognised as viable. The Argyle Diamond Mine in Western Australia is the most renowned Lamproite hosted mine - in 1994 produced 39% of worlds diamond production.

Kopje kimberlite exploration, Botswana

This newly awarded prospecting licence covering 15 km sq in highly prospective area 35 km east of DeBeers' large producing Orapa Mine. Initial exploration work planned for Q1 2012.

Konomo Alluvial Mine, Sierra Leone

This Alluvial diamond project covers 162km2 and has an indicated and inferred resource of 119,000 carats with large tracts of the river remaining unexplored. Circa 3,000 carats recovered by Paragon since operations commenced, with a parcel that includes c.34.18 carat "special" stone and 10.18, 10.46 and 9.96 carat gem quality stones.

Mabuki, Tanzania

Located 81km south of Mwanza, Tanzania with good infrastructure nearby (roads, power, water, transport) the licence sits within a known Kimberlite Field. Artisanal activity occurs to the west of licence with diamond bearing gravels identified off the edge of the licence. The intention is to explore (detailed geophysics and sampling) and map-out, then establish drill targets and define a resource. Wardell Armstrong completed a competent persons report on Tanzania in September 2010.